Strict liability rule

The strict-liability rule assigns fo firms fhe cosfs of residual risks that cannot be cost-effectively eliminated given current information. In turn, firms often have a strong incentive to find, act upon, and disseminate information that lowers their damage costs (or insurance rates), unless they can avoid their liability obligations as described earlier. 

After having first concentrated on the establishment of administrative rules ie, environmental protection rules, the public interest has been focusing on civil law ie, liability schemes complementary to protection rules respectively. It is argued that (strict) liability rules are deemed not only to ensure compensation for the party who suffered the damage, but also ensure that the operators behave in most responsible manner in order to avoid possible liability. 

In fhe case of chemical exposures thaf are privafe goods, govern-menf should provide information rather than regulation. And the negligence liability rule, rather than strict liability, should be applied. 

Under the negligence rule, injurers are liable for damages caused by their behavior only if they don t exercise due care, and victims are responsible for other damages. Under strict liability with contributory negligence, the opposite is true injurers are responsible for all damages unless the victims did not exercise due care. Under strict liability, injurers are responsible for all damages their products cause, period. 

Strict liability is efficient only when firms can do a great deal to reduce their product risks and consumers cannot. The negligence rule becomes more appropriate as consumer behavior increasingly affects damages, firm behavior decreasingly affects damages, and knowledge about products becomes more widespread. How do the facts about chemicals relate to such institutional demands ... 

The choice between liabilities also involves value choices about individual responsibility. Advocating no liability or the negligence rule is consistent with the belief that people individually should be responsible for thinking about their choices and risks and whether to insure against them. Advocating strict liability is consistent with different beliefs. 

The best mix of liability rules, information markets, and regulations varies across commodities even if efficiency is the only criterion. Because all are suboptimal in practice, the proper mix also depends on people s inefficiency preferences. Asserting that one values individual liberty eliminates only command-and-control regulation from the set of possibilities. Under the right circumstances, no liability, the negligence rule, strict liability, and strict liability with contributory negligence all promote individual liberty. On balance, 1 favor no liability or the negligence rule because 1 believe the adverse side effects of sfrict liability are too severe. 

When both injurers and victims care and activity levels affect damages but the victims do not purchase products from the injurers, as in cases of damages to cyclists from automobiles, no liability rule is optimal (ShaveU 1987, 29). In contrast, if cyclists suffer damages as a result of defective bike manufacturing, strict UabUity induces bike prices to reflect aggregate damages. 

In Germany, the Civil Code forms a basis for civil liability rules. However, a special environmental liability act [8] was enacted in 1990. The act entered into force on 1.1.1991. It applies to installations subject to approval pursuant to the Federal emission control law and it is based on a strict liability regime. If such an installation impairs the environment, the operator has to compensate for death, bodily injuries and damages to property or individual rights. 

If railroads are subject to strict liability to bystanders then the benchmark model would apply. This optimal result will not necessarily occur under a regime of negligence. Courts will define due care as consistent with the social>welfare maximizing level of preventive effort x). If the railroad provides this level of preventive effort or a higher level it will not be liable to compensate third parties. If it provides less preventive effort it will be liable. Therefore, the decision rule on the level of preventive effort is ... 

As the insurance industry lobbied behind the scenes for major changes, the delegates apparently ignored the informal ALI rule that members check their elients at the door. " To no one s surprise, the Restatement Third of Products Liability that emerged in mid-1997 could have been drafted by the Products Liability Advisory Council. It avoided any mention of strict liability and replaced the Public Interest Era consumer expectation test for product defects with the risk-utility test favored by the business community. It also required plaintiffs to present expert testimony that safer designs were reasonably available, a subtle change that enhanced the role of experts and limited the role of juries. ... 

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